Human Development Index for Rural Andhra Pradesh

39 Pages·2009·0.3 MB·English

Working Paper No. 99
Human Development
Index for Rural Andhra Pradesh

Author: Dr. Jatinder S. Bedi and Dr. H. Ramachandran

December 2008
1
Contents

Abstract 3
List of Tables 4

I. Methodology and Data Source 6

II. Analysis of data using Method I 16

III. Estimates of HDI for year 2001 in Rural
AP based on Method III 27

Summary and Conclusions 37

References 39
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Abstract

The method used to measure Human Development are reviewed in order to measure
Human Development Index for rural AP by considering indicators such as economic
attainment, longevity and education. Using UNDP method to estimate Human
Development Index, which is predominantly normative approach to club different
indicators by giving weights. The estimates are worked out with and without
considering inequalities in economic attainment indicator. IAMR survey data for year
2001 is used for this study. However, for making comparison over time, data and
analysis undertaken in other study is also used. In other methods, primarily for the
analysis of data for year 2001, inequalities in all indicators were taken into
consideration to measure Human Development using both UNDP and Principal
Component Analysis. The comparison of results show that there has been only
marginal improvement in Human development during the 1990s in rural AP
considering only inequality in economic indicator using UNDP method. However, the
results may differ significantly in case inequalities in all the variables are taken into
account and depending upon the methodology used as is demonstrated by analysis of
data for year 2001. But unfortunately comparison of analysis over time using the
modified approach was not possible due to lack of detailed data for other years.
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List of Tables
Title Page
Table 1: Inflation and inequality adjusted per capita consumption expenditure 17
(Rs per month in rural AP)
Table 2: Percentage share of income distributed among various decadal of population 18
Table 3: Composite indicator of education attainment 20
Table 4: Cluster Analysis 21
Table 5: Composite indicator of health attainment 23
Table 6: Human development index 23
Table 7: Education Attainment 25
Table 8: Attainment of Economic, Education, Health and HDI as Percentage of Maximum 26
Achievable for rural AP during 2001
Table 9: HDI: Including basic amenities for rural AP during 2001 27
Table 10: Economic attainment dimension during 2001 28
Table 11: Correlation matrix 29
Table 12: Component Matrix 30
Table 13: Education Attainment Dimension during 2001 31
Table 14: Component Matrix 32
Table 15: Health attainment indicator during 2001 32
Table 16: Component Matrix 33
Table 17: Basic amenities attainment dimension during 2001 34
Table 18: Component Matrix 34
Table 19: HDI: For rural AP during 2001 using principal component analysis 35
Table 20: Component Matrix 35
Table 21: HDI: Comparison from different methods for rural AP during 2001 36

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Human Development Index for Rural AP
Jatinder S. Bedi and H. Ramachandran1

Human development is defined as a process of enlarging people’s choice and raising the level
of well-being. These choices can be infinite and vary over time and space. Several studies have
shown the absence of a linear relationship between accumulation of wealth and general human
welfare. Recognition of inadequacy of income-related indices in measuring ‘development’ led
to the evolution of various other constituents of human well-being – e.g. the Level of Living
Index (UNRISD 1966) and the Physical Quality of Life Index (Overseas Development
Council 1979. However, the Human Development Index (HDI) is widely used by
substituting income with some closely substituted indicator.

No other indicator of development has attracted as much public attention in recent years as
the HDI. The approach to this index gained momentum with the release of the annual
Human Development Reports (HDR) by the UNDP since 1990. The concept itself is not,
however, new. From among these, the UNDP, through its global HDRs, identifies the choice
to lead a long and healthy life; to acquire knowledge and be educated and to have access to
resources needed for a decent level of living as the three most critical and socially valuable
indicators for measuring HDI.

Thus, HDI is regarded as some kind of a measure of human welfare, which the GDP
approach is unable to fully consider the aspect human development. Clearly, the adequacy of
HDI would depend upon the number of dimensions of human development it is able to
consider. Many people tend to use equal weights for various indicators. Most studies try to
work out the human development indicator by trying to capture three indicators in this index,
namely, economic attainment or command over resources, longevity and education. The
aspect of basic amenities provides a crucial dimension to the issues related to human
development. Thus, this is taken the fourth important indicator for estimating the HDI in
several studies.

1 Dr. Jatinder S. Bedi is presently working with NCAER as Fellow and Dr. H. Ramachandran is Professor at
Delhi School of Economics. Both the researchers served earlier IAMR, Dr. Bedi as Senior Research Officer and
Prof. Ramachandran as Director of the institute.
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This study makes an attempt to estimate the changes in Human Development in rural
Andhra Pradesh (AP) over time by using UNDP and PCA methodologies, with and without
considering inequalities. The method considering inequalities is, of course, better than the
one ignoring it, as equality is one of the important considerations for improving human
welfare. However, the analysis available for 1983, 1993-94, and 1999-2000 from the
Planning Commission’s study and for 1994 from a NCAER study, made it possible to
consider inequality only for economic indicators. Thus, Method I was used using data from
the IAMR survey, 2001 mainly for bringing out comparison of results over time.

In Method II, the inequalities in all the indicators were taken into account, but that was
made possible only for data for 2001 based on the IAMR survey as finding inequalities from
the analysis undertaken in earlier reports were not possible for other indicators save the
economic ones. The results of human development attainment using Method II are definitely
going to be lower than Method I, as all the indicators are going to be adjusted by level of
inequalities in these indicators by multiplying it with One minus Ginni Coefficient value for
the indicator.

Principal Component Analysis, used in Method III of this study, has a definite edge over the
UNDP method as one of its beauties is to have as few indicators as possible and yet make it
possible to capture almost all aspects of human development. In this method, the weights are
supposedly treated as objective with little personal preferences. Thus, this study eventually
tries to compare the results derived using all the three methods.

The methodologies used in this study are explained in details below.

I. Methodology and Data Source
The three methodologies adopted to measure human development index for rural AP are
explained one by one:

Method I
Method I adopted in this study is similar to the UNDP method. The Planning Commission’s
method of working out HDI is similar to the UNDP method, albeit with a few
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modifications. The UNDP method of estimating HDI tries to work out human well-being
by assessing the three dimensions such as economic attainment or command over resources,
longevity and education. The issue of weights to combine the identified indicators on each of
the three dimensions of well-being can always be debated. The Planning Commission’s
National Human Development Report, 2002 has adopted a predominantly normative
approach as against a purely empirical basis of deriving weights to club different indicators.
The argument is that there are good reasons to suggest that different aspects of well-being
have to be correlated. It follows that attainment on each aspect of well-being is equally
important and hence should be equally weighted.

HDI = 1/3 * (X +X +X3) -------------------------- (i)
1 2

Command over resources: the ability to lead a decent and socially meaningful life. Say, X.
I
Economic resources such as income through employment or other sources could be better
estimated by way of consumer expenditure or income. The Planning Commission’s National
Human Development Report (2002) corrected wide disparities among individuals by
adjusting the per capita consumption with the Gini Coefficient. For the sake of comparison
over time, the corrected consumption values are estimated at 2001 prices using state-specific
poverty lines at 2001 prices as deflators. Thus, X is inflation and inequality adjusted per capita
1
consumption expenditure.

Education: the ability to read, write and acquire knowledge, say X . In the Planning
2
Commission, the composite indicator on educational attainment is derived using following
formula:
X = e * 0.35+ e * 0.65
2 1 2
This contains e : i,e. literacy rate for the age group above 7 years.
1
and e: i,e. adjusted intensity of formal education such as no of years of schooling etc, which
2
is taken care by taking average of enrolment ratio in the age group 6-11 and 11-14.

Longevity: The ability to live long and lead a healthy life. Say X is taken for composite
3,
indicator on health attainment. For most individuals the choice to live a healthy life, free
from illness and ailments and a reasonable life span are crucial attributes in the notion of
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personal well-being. Similarly, for a society, a transition from high incidence of morbidity
and mortality to a state where people generally enjoy long and disease-free lives is considered
a desirable and valued social change. It is only natural, then, that indicators on health and
longevity, as well as indictors that variously capture demographic concerns of a society are
important constituents in the framework for evaluating the development process under the
human development approach.

Being healthy and being able to live long also brings some indirect benefits to individuals or
to the society as a whole. It enables release of resources that, otherwise, would be spent on
treatment of ill health and ailments, at least, at the household level and perhaps also at the
level of public provisioning for some health care services.

The relationship between health and poverty or health and development is complex,
multifaceted and multidirectional.

Composite indicator on health attainment, say X is
2
X = h * 0.65+ h * 0.35
2 1 2
This contains h : i.e. life expectancy at the age of 1 year
1
and h : i.e. infant mortality rate.
2

Life expectancy is a macro-concept and cannot be estimated individually as in the case of
consumption and education. Life expectancy could either be worked out for a village, district
or entire sample data.

Standardisation of Indicators: All the indicators were standardised as variables chosen for
analysis are usually measured in different units and are generally not additive. Hence, it is
necessary to convert them in some standard comparable units such as initial scale chosen for
measuring them does not bias the results.

Where xij is replaced with Xij in equation (i).
xij = (( Xij – Xi minimum)/( Xi maximum – Xi minimum)) -------------------------- (ii)

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Here I is 1 for economic attainment variable, 2 for education and 3 for health and j are
number of observations in each indicator.

The transformed indicators series is now scale free and have a mean of zero and a standard
deviation of unity. NCAER working paper No 83, 2002, criticised the standardised process
adopted in the methodology adopted by UNDP and suggested standardising of these
indicators by way of dividing each indicators by their mean as a better option. The argument
put forward in favour of latter technique is that it does not disturb relative position as well as
dispersion. However this study prefers to adopt practice of standardisation of indicators as
adopted in UNDP methodology. This is because this process of standardisation as suggested
in the NCAER, 2002 working paper has a flaw in that it gives higher weight to an indicator
with higher dispersion. Therefore, we adopted the UNDP method of standardisation, where
range is restricted in between 0 and 100 depending on the level of attainment based on
minimum and maximum values and one can really assess the level of attainment from the
standardised value of a particular indicator.

In case of Economic attainment, it is worked out based on the maximum consumption
expenditure, which is estimated at Rs 853.93 and minimum Rs 172.74 at current prices from
district-wise analysis of rural AP for 2001. This has been kept constant for all the years to
make the comparison over time meaningful.

In case of literacy attainment indicator, all the values including the maximum and minimum
values are estimated in percentage terms.

In the case of the health indicator, the maximum and minimum achievable are applied in
equation (ii) to work out the percentage of health attainment:

Health attainment indicator as percentage of maximum = (Mean Value of Health Attainment
– Minimum Health Attainment) / (Maximum Health Attainment - Minimum Health
Attainment)

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Inequalities Adjusted Indicators: The inequalities in this study are taken into account by
dividing each indicator by 1 minus Gini Coefficient (1-gc). This is because a given level of
income achievement in an economy is more desirable in case it is more equally distributed.
The inequalities for Method I are worked out only for economic indicator for which
consumption is taken as representative. Gini Coefficient for economic attainment indicator
is worked out using household consumption data from IAMR, 2001 survey for the entire
state as a whole. The methodology used in this study is different compared to planning
commission method on the basis of adjustments for inequalities.

e.g. in the case of the economic attainment indicator, it would be like:
Economic attainment indicator as percentage of maximum attainable is estimated using
following formula = (Inequalities adjusted observations of economic attainment – Minimum
economic attainment) / (Maximum economic attainment - Minimum economic attainment)

The Planning Commission’s report, on the other hand, adjusted each observation on the
indicator for inequalities. Thus, each value in the formula as explained below is adjusted for
inequalities:

Inequality adjusted economic attainment indicator as percentage of maximum attainable is
estimated using following formula = (Inequality adjusted observations of economic
attainment – minimum economic attainment as derived using adjusted values) / (Maximum
economic attainment as derived using adjusted values - Minimum economic attainment as
derived using adjusted values)

The limitations of the method adopted by the Planning Commission for inequality
adjustment is that if the inequities are high or low, but are equal, within each observation of
each indicator, then the inequality adjusted indicator would be same as unadjusted one.
Thus the purpose of reflecting the true extent of inequality and adjusting the indicator
accordingly get defeated to that extent. This is because mean and maximum value would also
be proportionately downgraded in case of equal inequalities within all observations.

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